Tag Archives: forfeiture programs

John R. Emshwiller and Gary Fields of the Wall St. Journal report, August 22, 2011, that asset seizures by the federal government is one the rise, including the assets of those who are innocent of any crime.

James Leito (WSJ photo)

New York businessman James Lieto is a victim. An armored-car firm hired by Lieto to carry money for his check-cashing company got ensnared in a FBI probe. Agents seized about $19 million—including $392,000 of Lieto’s money—from vaults belonging to the armored-car firm’s parent company.

Under the law, an innocent third party generally can’t seek an asset’s return until the underlying criminal case is resolved, which can take time. Further, an innocent party’s money is returnable if it’s clearly separate from the fraud. Lieto’s two sealed and marked bank bags with the $392,000 qualified, his attorney, argued in court filings.

The government countered that the crooks’ operation, which included the armored-car service, routinely commingled customers’ money. Thus, everyone had to get in line as fraud victims, but fraud victims might get about 25 cents or less on the dollar.

In this case, two men eventually pleaded guilty and the government agreed to return Lieto’s money back in full.

Lieto is but one among thousands of Americans in recent decades who have had a jarring introduction to the federal system of asset seizure. Some 400 federal statutes—a near-doubling, by one count, since the 1990s—empower the government to take assets from convicted criminals as well as people never charged with a crime.

Last year, forfeiture programs confiscated homes, cars, boats and cash in more than 15,000 cases. The total take topped $2.5 billion, more than doubling in five years, Justice Department statistics show.

The expansion of forfeiture powers is part of a broader growth in recent decades of the federal justice system that has seen hundreds of new criminal laws passed. Some critics have dubbed the pattern as the overcriminalization of American life. The forfeiture system has opponents across the political spectrum, including representatives of groups such as the American Civil Liberties Union on the left and the Heritage Foundation on the right. They argue it represents a widening threat to innocent people.

Supporters however say there are adequate protections for the innocent, and describe the laws as a powerful tool for returning money to crime victims. An example is the Bernie Madoff case. The government has recovered for eventual distribution to victims more than $650 million from imprisoned swindler Madoff and others who received money from his scheme. Federal officials are in the process of recovering over $6.5 billion more from the Madoff fraud.

Last year, federal authorities say, some $293 million of forfeiture proceeds were returned to crime victims nationally, nearly double the amount in 2009. The Justice Department filed about 90,000 criminal cases last year. There were forfeiture actions in a total of about 3,700 criminal cases, double the number of five years earlier.

Top federal officials are also pushing for greater use of civil-forfeiture proceedings, in which assets can be taken without criminal charges being filed against the owner. In a civil forfeiture, the asset itself—not the owner of the asset—is technically the defendant. In such a case, the government must show by a preponderance of evidence that the property was connected to illegal activity. In a criminal forfeiture, the government must first win a conviction against an individual, where the burden of proof is higher.

New Jersey businessman Raul Stio is an example. Last October, the Internal Revenue Service, suspicious of Stio’s bank deposits, seized more than $157,000 from his account, but Stio hasn’t been charged with any crime. In a court filing in his pending civil case, the Justice Department alleges that Stio’s deposits were structured to illegally avoid an anti-money-laundering rule that requires a cash transaction of more than $10,000 to be reported to federal authorities. Stio had made 21 deposits over a four-month period, each $10,000 or less. Stio’s attorney says his client was simply saving to buy a house and there was no attempt to evade the law. The deposits merely reflected the amount of cash his client’s businesses, a security firm and bar, had produced.

In fiscal year 2010, there were more than 11,000 noncriminal forfeiture cases, according to available federal statistics. That figure has held fairly steady the past five years.

It’s tough to know how many innocent parties may be improperly pulled into the forfeiture system. Last year, claimants challenged more than 1,800 civil-forfeiture actions in federal court, Justice Department figures show.

There is also a profit incentive for cash-strapped federal, state, and local governments.

Under a 1984 federal law, state and local law-enforcement agencies that work with Uncle Sam on seizures get to keep up to 80% of the proceeds. Last year, under this “equitable-sharing” program, the federal government paid out more than $500 million, up about 75% from a decade ago.

The payments give authorities an “improper profit incentive” to seize assets, says Scott Bullock of the Institute for Justice, a libertarian public-interest law firm in Arlington, Va. It’s a particular concern amid current state and local government budget problems, he contends.

Seeming abuses occasionally emerge. In 2008, federal Judge Joseph Bataillon ordered the return of $20,000 taken from a man during a traffic stop in Douglas County, Neb. Judge Battaillon quoted from a recording of the seizure, in which a sheriff’s deputy complained about the man’s attitude and suggested “we take his money and, um, count it as a drug seizure.” The judge’s order said the case produced “overwhelming evidence” that the funds were clean.

A particular problem is the lack of access to lawyers of poor people. Jorge Jaramillo, a construction worker, says he couldn’t afford a lawyer after more than $16,000 was seized from him last year in a traffic stop. “I had all of $20 left,” he says. Jaramillo wasn’t charged with a crime.

The Justice Department argued the money was related to drug dealing, pointing to air fresheners in the car, which could mask the smell of drugs, and a fast-food bag containing cigar tobacco, which the filing said was often a sign that the cigar wrapper had been used to smoke marijuana. A police dog had signaled that the cash carried residue of illegal drugs. Such “dog sniffs” are a common but controversial feature in forfeitures.

The government eventually agreed to return Jaramillo’s money, with interest.